Thursday, February 21, 2013

What the Heck is LWEC?


LWEC is Loss of Wage-Earning Capacity and is found in the Federal Employees’ Compensation Act, (FECA) Manual part two at 2-0901-15.

Here’s the link to part two of the FECA Manual: http://www.dol.gov/owcp/dfec/regs/compliance/DFECfolio/FECA-Part2.pdf

A claimant is entitled to compensation for Partial Disability.  Where injury-related impairments prohibit the claimant from returning to the employment held at the time of injury, or from earning equivalent wages, but do not render the claimant Totally Disabled for all gainful employment, the claimant is considered Partially Disabled and is entitled to compensation for LWEC.

The FECA provides for a reduction in compensation to reflect a LWEC when the disability for work is partial (some ability to work).  The employee's actual earnings may be used to calculate reduced compensation if these earnings are found to fairly and reasonably reflect his or her earning capacity. 

The method of computing compensation for wage loss due to partial disability is set forth in the FECA at Section 8106(a) and states:

If the disability is partial, the United States shall pay the claimant during the disability monthly monetary compensation equal to 66 2/3% (or 75% if there are dependents) of the difference between the claimant’s monthly pay and the claimant’s monthly wage-earning capacity.

In the case of Albert Shadrick, 5 ECAB 376, issued March 23, 1953, the Employees' Compensation Appeals Board (ECAB) established a principle to eliminate economic factors such as inflation or recession when computing the amount of monetary compensation due for partial disability. This is known as the Shadrick Formula.

According to this 'formula', the injured worker would be paid compensation based on the difference between the pay which had been determined to be his or her post-injury WEC, and the contemporaneous pay of the date of injury job.  OWCP established the "Shadrick Formula" as the method of computing compensation when determining an injured worker's WEC. (See FECA Manual part two at 2-900.16).

There are three ways a LWEC can be put in place:

1). If the claimant returns to a new position or a modified version of the date of injury position with the previous employer (the Agency you were working for when you were injured) and is earning less than the current pay rate of the job held when injured, the claimant has sustained a loss in wage earning capacity as a result of the injury. 

Once the claimant has satisfactorily performed the position for a period of at least 60 days, the Claims Examiner, (CE) should review the case to determine whether the medical evidence establishes permanent restrictions and whether the position fairly and reasonably represents the claimant’s wage earning capacity.  If so, the CE should prepare a formal decision making this finding.  

If the position does not fairly and reasonably represent the claimant’s wage earning capacity, no decision can be issued.

2). If the claimant returns to work with a new employer and is earning less than the current pay rate of the job held when injured, the claimant has sustained a loss in wage earning capacity as a result of the injury.

Once the claimant has satisfactorily performed the position with the new employer for a period of at least 60 days and the medical evidence establishes permanent restrictions, the CE should prepare a formal decision addressing whether the earnings fairly and reasonably represent the claimant’s wage earning capacity.

If the position does not fairly and reasonably represent the claimant’s wage earning capacity, no decision can be issued.

3). Determination of LWEC without actual job placement: 
In these cases, the claimant has been notified that the OWCP will provide Vocational Rehabilitation assistance leading to re-employment.  The claimant is able to return to work and the file contains documentation that establishes appropriate work is reasonably available in the local labor market and benefits are adjusted to reflect any loss in wage earning capacity. 

This type of decision can be issued after the OWCP has made reasonable efforts to return the claimant to work and has advised the claimant of his or her rights and responsibilities. 

OWCP issues a formal decision based on the selected jobs, regardless of whether the claimant is working or not. In this instance, the CE will prepare a pre-reduction notice, addressing the claimant's loss of wage earning capacity based on a suitable position for which the claimant received training and/or placement efforts.  After the notice period ends, a formal decision establishing the claimant’s wage earning capacity will be issued, taking into account any evidence or arguments submitted by the claimant during the notice period.

A finding by OWCP that the claimant has no wage earning capacity or the claimant has no re-employment potential for the indefinite future can be made on the basis of a medical or vocational determination.

If no rehabilitation plan can be developed due to the severity of the claimant's medical condition and/or the limited job market in the claimant's commuting area, the CE may determine that the claimant has no wage earning capacity.  

If there is no expectation of further recovery or a change in the vocational determination or medical condition, the case can be placed in PN status with the concurrence of the Supervisory Claims Examiner. 
(*PN:  Entitled to payment on periodic roll; formally determined to have no wage earning-capacity or re-employment potential for indefinite future).

See more about Vocational Rehabilitation at the Vocational Rehab tab.

The FECA provides that a partially disabled employee shall be paid compensation equal to 66 2/3% (or 75% with dependents) of the difference between the claimant’s pay and his or her wage-earning capacity. 

The method for computing the compensation payable where an employee has actual earnings (is working) or a wage-earning capacity (is able to work) is called the Shadrick formula, as it reflects the principles set forth in Albert C. Shadrick, 5 ECAB 376.  In that decision the ECAB found that section 5 U.S.C. 8106(a) does not state that compensation is to be based on the difference between the employee's earnings at the time of injury and whatever variable dollar income the employee may have in the future.  Rather, it is to be based upon the loss of capacity to earn wages. 

The Shadrick formula:

(1)      Pay rate when:
(a)  Injured                                                        $_________
(b)  Disability began                                           $_________
(c)  Compensable disability recurred (if any)       $_________

(2)  Current pay rate for job and step when injured      $_________
(3)    (a) Is capable of earning                                      $_________
        (b) Has actual earnings of                                    $_________
(4) WEC [item (3) divided by item (2)]                          $________%
(5) WEC [item (4) x item (1)]                                        $_________
(6) Loss of WEC [item (1) minus item (5)]                      $_________
(7) Compensation [item (6) x 66 2/3% or 75%]                $_________
(8) CPI (expressed in decimal terms)
            (a)   Item (7) x 1                                    $________ (rounded)
*CPI: Consumer Price Index; periodic adjustments to compensation payments which are made to reflect increases in the cost of living.
(b)   Item (8a) x 1                                               $________ (rounded)
(c)   Item (8b) x 1                                               $________ (rounded)


In calculating LWEC, the direct comparison of wages in lines 2 and 3 of the formula above is always based on the current salary of the job when injured, not that held at the time disability began or the date disability recurred.

*Rural Letter Carriers Only: 
While the salaries for Rural Letter Carriers may vary over the life of the claim due to reevaluations of the route, the only salaries that affect the pay rate for compensation purposes is the pay rate on the date of injury, when disability began, or at the time of a qualifying recurrence.  The highest of the three is used to compute compensation.

Changes in route evaluations which occur after a final LWEC decision is issued do not alter that decision.

A Rural Carrier who returns to work but whose hours are restricted due to the effects of the job-related injury is entitled to compensation for any LWEC.

A Rural Carrier who returns to full duty but whose route was reduced during the period compensation was received is not entitled to continuing compensation, since the reduction is not due to injury-related disability.

The "current pay of job held when injured" is defined according to whether the boundaries of the carrier’s route have changed: If not, the hourly rate for the employee's grade and step when injured is multiplied by the number of hours representing the route's current evaluation.

If so, the date-of-injury job when injured no longer exists.  Therefore, the current pay for the grade and step when injured should be multiplied by the number of hours representing the route's evaluation at the time of injury.



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